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Consistency in disclosure of expected credit losses

Consistency in disclosure of expected credit losses

Recommendations for large banks to enhance ECL disclosures to meet investors’ needs

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Colin Martin

Partner

KPMG in the UK

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DECL is encouraging banks to adopt the recommendations as soon as possible

The UK Taskforce on Disclosures about Expected Credit Losses (DECL taskforce) has issued its second report, which contains some amendments to its earlier recommendations and illustrative examples.

“The illustrative examples in this second report make it easier for banks to take practical steps to implement DECL’s recommendations”

Colin Martin
Deputy Leader of KPMG’s Financial Instruments Topic Team 

Amendments to existing recommendations

In November 2018, the DECL taskforce issued its first report, which included disclosure principles and recommendations for large UK banks on their disclosures about expected credit losses (ECL) in their annual reports. The report covered nine separate areas, including:

  • forward-looking information;
  • movement and coverage across stages; 
  • changes in the balance sheet ECL estimate; and
  • measurement uncertainty, future economic conditions and critical judgements and estimates. 

In this second report, the DECL taskforce covers the same areas but makes some amendments to its recommendations, including more detail on disclosures around measurement uncertainty, future economic conditions and critical judgements and estimates. 

Illustrative examples

To help banks implement the recommendations, the report also contains illustrative examples, which outline how recommended disclosures might be presented in the annual report. 

Recommendations retain their global influence

The recommendations enhance or add to the existing requirements set out in IFRS®9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures, and aims to reflect the disclosures that analysts and investors would like to see in banks’ annual reports.

Although its recommendations are aimed at large UK banks, it is anticipated that they may become best practice for other banks in the UK and globally. To find out more, read its Recommendations on a comprehensive set of IFRS 9 ECL disclosures or speak to your usual KPMG contact. 

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